Chap 3 aggregate expenditure

Principles of Economics (1 of 2)

Global Edition

Part V

The Core of Macroeconomic

Theory

Part V The Core of Macroeconomic

Theory

•The level of GDP, the overall price level, and the level of

employment are influenced by events in three markets:

–Goods-and-services market

–Financial (money) market

–Labor market

Figure V.1 The Core of

Macroeconomic Theory

•We build up the macroeconomy slowly. In Chapters 23 and 24, we examine the market

for goods and services. In Chapters 25, we examine the money market.

•Chapter 26 introduces the aggregate supply (AS) curve and the Fed rule and derives

the aggregate demand (AD) curve. Chapter 27 uses the AS/AD model to examine policy

and cost effects, and Chapter 28 discusses the labor market.

Principles of Economics (2 of 2)

Global Edition

Chapter 23

Aggregate Expenditure

and Equilibrium Output

Chapter Outline and Learning

Objectives (1 of 2)

23.1 The Keynesian Theory of Consumption

•Explain the principles of the Keynesian theory of

consumption.

23.2 Planned Investment (I) versus Actual Investment

•Explain the difference between planned investment and

actual investment.

23.3 Planned Investment and the Interest Rate (r)

•Understand how planned investment is affected by the

interest rate.

Chapter Outline and Learning

Objectives (2 of 2)

23.4 The Determination of Equilibrium Output (Income)

•Explain how equilibrium output is determined.

23.5 The Multiplier

•Describe the multiplier process and use the multiplier

equation to calculate changes in equilibrium.

Looking Ahead

Appendix: Deriving the Multiplier Algebraically

•Show that the multiplier is 1 divided by 1 minus the MPC.

Chapter 23 Aggregate Expenditure

and Equilibrium Output (1 of 2)

•aggregate output The total quantity of goods and

services produced (or supplied) in an economy in a given

period.

•aggregate income The total income received by all